Households in the UK could soon be paying more for groceries, experts have warned, as the economic fallout from war in Iran hits economies around the globe.
Fuel prices have already started to rise across the country as the cost of oil reaches highs not seen since 2022 following Russia’s invasion of Ukraine. An energy bill shock is also anticipated in July, when Ofgem’s price cap is forecast to rise by as much as £300, according to one consultancy.
But a more unlikely knock-on effect on food prices could be expected as soon as summer, households have been warned, as pressures on natural gas trade drives up the price of synthetic fertiliser.
The complex product is essential for British agriculture as it is used in some form in the vast majority of arable farming. Cereals, vegetables and oilseed crop activity all rely heavily on synthetic fertiliser to improve yield.
But this essential tool is also considered an ‘energy product’, as it requires natural gas to be produced. The nitrogen that is prevalent in synthetic fertiliser is made by combining methane (a natural gas) with nitrogen in the air to create ammonia.
This is then combined with carbon dioxide to form urea, or ammonia nitrate. A great deal of this is produced in the Middle East, with up to 30 per cent of the world’s supply usually passing through the Gulf.
The global pressures have pushed up the price of ammonium nitrate fertiliser from £404 a tonne on the day before the US attacked Iran, to £522 a tonne on 20 March, marking a near 30 per cent increase in just under a month. The costs had increased by just 12 per cent in the entire year before this.
Lord John Fuller, chairman of Nitrasol – a liquid fertiliser producer in Norfolk – said urea ammonia nitrate prices have “gone up probably by about 25 per cent as we've had to fight off other buyers”.
He told Sky News: “We had a shipment last Sunday, and those farmers that bought early are securing the old price, but for those who left it to the last minute, I'm afraid that we're having to buy from the new cargoes, those are more expensive.
"It's a really serious situation. In some respects, it's worse than it was four years ago in the Ukrainian situation, and we all know what happened six months later.
"There was 10 per cent inflation, and that knocked the government right back. And I just hope that the government grips this."
The most prevalent macronutrient in synthetic fertiliser used in Britain is nitrogen, as the macronutrient has a “large immediate effect on crop growth, yield and quality”, according to Defra research.
“Most agricultural soils in Great Britain contain too little naturally occurring plant-available nitrogen to meet the needs of a crop, so supplementary nitrogen applications must be made each year,” the department explained in its recent British Survey of Fertiliser Practice.
Synthetic fertiliser is estimated to boost crop yield by between 30 and 50 per cent, meaning a sudden increase in costs will force farmers to choose between lower yields or paying more to produce the same. Either way, the costs would be passed on to consumers.
Speaking to The Independent earlier in the month, economist James Meadway warned: “If fertiliser supplies are disrupted for a period of time... then food prices will start to look pretty dramatic, I think.
“The Gulf now is one of the world’s largest producers of artificial fertiliser and it does that because a big input to making fertiliser is natural gas, and there’s lots of natural gas in the gulf, so it’s quite cheap for companies to set up there.
“That’s a big global market where, if you have a disruption, it starts to feed into the price of fertilisers that people are buying everywhere.”
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